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Poor Bob. Rejected like a Las Vegas mortgage loan applicant. And now Duncan gets to be the big kahuna Global Exchange CEO who can afford jaunts to Irish Castles. Pity. I guess it’s back to the drawing board. Find a new target to merge with (LSE?). List some more reverse merger “global” IPO’s. Wait for the next Davos Boondoggle…

Well, Nasdaq/ICE yesterday pulled their $11 billion bid for the NYSE Euronext, citing problems with the Regulators. NYX fell 10% on the news, while the LSE rose 7% on a higher possibility that they might end up on Nasdaq’s arm. Meanwhile north of the border, on Sunday, a group of Canadian banks and pension funds announced their intention to derail the LSE bid for TMX.

Exchanges, of course, need to consolidate. They have high fixed costs now that involve cash-flow-sucking data centers, whose technology needs are constantly increasing. When the exchanges have these kinds of high fixed costs, and are faced with 1) diminishing listing fees, 2) diminishing investor involvement in the secondary markets, and 3) of course diminishing remora-like HFT activity upon which their business models are based on, they must get larger or die.

Looking at “the trees”, this is the truth. However, “looking at the forest”, we can only hope that they understand that their salvation, and in many respects our capital markets’ salvation, depends on their addressing the root cause of their ailment, and how they themselves brought about that very ailment.

The exchanges need to eventually understand that pitting one class of market participants against others, and serving as the arms dealer as well as the referee, cannot work. This is so simple. It is amazing that they can’t see it.